No-Arbitrage Taylor Rules

We thank Ruslan Bikbov, Sebastien Blais, Dave Chapman, Mike Chernov, John Cochrane, Charlie Evans, Michael Johannes, Andy Levin, David Marshall, Thomas Philippon, Tom Sargent, Martin Schneider, George Tauchen, and John Taylor for helpful discussions. We especially thank Bob Hodrick for providing detailed comments. We also thank seminar participants at the American Economics Association, American Finance Association, a CEPR Financial Economics meeting, the CEPR Summer Institute, the European Central Bank Conference on Macro-Finance, the Federal Reserve Bank of San Francisco Conference on Fiscal and Monetary Policy, an NBER Monetary Economics meeting, the Society of Economic Dynamics, the Western Finance Association, the World Congress of the Econometric Society, Bank of Canada, Carnegie Mellon University, Columbia University, European Central Bank, Federal Reserve Board of Governors, Lehman Brothers, Morgan Stanley, PIMCO, and the University of Southern California for comments. Andrew Ang and Monika Piazzesi both acknowledge financial support from the National Science Foundation. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis,the Federal Reserve System, or the National Bureau of Economic Research.